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Carlyle Is Said to Be Raising New Brazilian Buyout Fund

23 July 2014

(Dealbook) The Carlyle Group has made large strides toward raising a new Brazilian buyout fund, obtaining some R$375m, or about US$170m, in a first close.

Investors include Banco do Brasil and Brazilian pension funds, said the person, who requested anonymity because he was not authorized by the firm to speak.

The close, which occurred last week, is the first step in the private equity firm’s plans to raise what it hopes will ultimately be a 1 billion reais ($452 million) Brazilian fund.

It comes at a time when several investment firms are trying to raise new funds this year mainly to invest in Brazil, even amid an economic slowdown.

Advent International is looking to raise an international Latin America-focused $2 billion fund, according to two people briefed on that firm’s plans. Gávea Investments is near a final close of a $1 billion to $1.2 billion fund, DealBook reported last week.

For Carlyle, the fund-raising suggests the firm continues to stay optimistic about Brazil, where in 2008 it formed a South American buyouts team.

Its first local fund, 360 million reais (or $225 million at exchange rates at the time) closed in 2011 and also counted Banco do Brasil as a main investor. That was considered a significant milestone in the industry: a rare instance where a foreign private equity firm drew Brazilian institutional investors and also allowed an investment committee to weigh in on decisions, long considered a bureaucratic hassle by foreign private equity firms.

That fund was raised in parallel with a separate $776 million South American Buyout Fund, which also invests in Brazil.

That international fund still has significant capital remaining, according to two people briefed on the firm’s plans. That is in part because in 2013 the firm did not make a single investment in a new company in Brazil, they said.

Brazil’s economy has deteriorated in recent years with sluggish growth and no imminent sign of a lift. This week economists lowered their forecast for the country’s economic growth this year to less than 1 percent.

A survey of 100 economists by Brazil’s central bank showed that they pegged growth for 2014 at a dismal 0.97 percent. That is down from their estimates of 1.05 percent last week and 1.16 percent one month ago.

That could raise concerns about Brazil’s consumer goods sector, where until now Carlyle has bet heavily. Its portfolio includes Scalina, a manufacturer and retailer of women’s lingerie and hosiery, Ri Happy, a retail toy store, and Tok & Stok, a large furniture chain.

It also sought to tap into other sectors like technology, but this year lost out to Kohlberg, Kravis Roberts & Company in a bid to acquire Aceco TI, a Brazilian data center company.

For now, though, the firm is focused on convincing investors that opportunities for private equity abound in Brazil.

Carlyle executives did not return messages seeking comment.